Murphy USA's (MUSA) Q1 Earnings Beat On High Fuel Gallons

Murphy USA Inc. (NYSE:MUSA) reported first-quarter 2019 earnings per share of 16 cents, beating the Zacks Consensus Estimate of 10 cents and the year-ago period adjusted profit of 12 cents. The better-than-expected bottom line could be attributed to robust retail gallons and same-store sales (SSS) volumes, which rose 3.9% and 1.8% year over year, respectively.

Murphy USA’s operating revenues of $3.1 billion decreased 3.9% year over year and missed the Zacks Consensus Estimate by a whisker on lower retail gasoline prices. To be precise, average retail gasoline prices during the quarter were $2.15 per gallon, falling from $2.34 per gallon a year ago.

Revenues from petroleum product sales came in at $2.5 billion, down 5.2% from the first quarter of 2018 but came ahead of the Zacks Consensus Estimate of $2.4 billion. Moreover, merchandise sales, at $606.2 million bettered our estimate of $565 million and rose 6.8% year over year.

Key Takeaways

The company’s total fuel contribution was up 11.9% year over year to $128.2 million, primarily driven by higher fuel and merchandise contribution dollars and retail gallons. Total fuel contribution (including retail fuel margin plus product supply and wholesale results) came in at 12.3 cents per gallon, up from with 11.4 cents per gallon in the first quarter of 2018.

Retail fuel contribution rose 4.5% year over year to $87.6 million despite flat margins (8.4 cents per gallon). Retail gallons were up 3.9% from the year-ago period to 1,041.6 million gallons in the quarter under review. Volumes on a SSS basis rose 1.8% from the first quarter of 2018.

Contribution from Merchandise increased 6.6% to $97.5 million on even as unit margins, at 16.1%, remained flat year over year. On SSS basis, total merchandise contribution was up 4.7% year over year in the quarter under review on the back of higher tobacco and non-tobacco margins that increased 6.8% and 4.8%, respectively.

Fuel gallons rose 2.1% and merchandise sales increased 5% on average per store month (or APSM) basis. Fuel gallons per month rose 1.8% and merchandise sales increased 5.4% on SSS basis.

Balance Sheet

As of Mar 31, Murphy USA — which opened one new retail location to bringing its store count to 1,473 — had cash and cash equivalents of $180.4 million, and long-term debt (including lease obligations) of $838 million, with a debt-to-capitalization ratio of 51.2%.

During the quarter, the company bought back shares worth $13.3 million.

Zacks Rank & Key Picks

Murphy USA, which came into existence following the 2013 spin-off of Murphy Oil Corporation’s (NYSE:MUR) downstream business into a separate, independent and publicly-traded entity, holds a Zacks Rank #3 (Hold).

Meanwhile, investors interested in the the energy space could look at some better options like ProPetro Holding Corp. (NYSE:PUMP) and TransCanada Corporation (TO:TRP) that sport a Zacks Rank #2 (Buy).

The 2019 Zacks Consensus Estimate for Midland, TX-based ProPetro is $2.53, representing some 26.5% earnings per share growth over 2018. Next year’s average forecast is $2.79 pointing to another 10.6% growth.

TransCanada has a 100% track of outperforming estimates over the last four quarters at an average rate of 19%.

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